12. (a) Over the years there has been great improvement
in farm technology. As a result, the
American farmer is now more productive than ever before. However, the economic
consequence of increased productivity has been a lowering of the price of farm
output. Explain and show the effects of better technology
on a demand and supply diagram.
(b) Suppose because of farmer complaints the government
has decided to guarantee a price for farm products. Would this be a price
ceiling or floor? Show and explain.
(c) What are the consequences for farm output as a result
of this guaranteed price? Show and explain
(d) What does the term “equilibrium” mean in
the context of a market economy?
(e) Explain two ways in which there can be a new
equilibrium at the “guaranteed” price.
Surgeon General has mounted a very successful advertising campaign in favor of cigarette smoking directed at consumers. Show
and explain the effects of this on a demand/supply diagram for cigarettes.
(b) Based on your graph above, can some people actually
end up decreasing their consumption of cigarettes? Show and explain.
c) Suppose there is a shift in the demand curve but
there is no change in the amount of cigarettes sold. Show and explain how that
(d) Under what scenario (demand/supply diagram) would
the ad. Campaign be most successful?
(e) Suppose, instead of targeting demand, the government
decided to influence supply. Explain how this might happen.
(f) ” The degree to which a campaign in favor of smoking directed towards the supply of
cigarettes is successful depends upon the elasticity of demand.” True or
False? Show and explain.
The market for apples is not
in equilibrium at P= $0 because producers are not willing to supply anything
free and there is excess demand worth 8 apples. Producers, on the other hand,
say that they will be happy to meet the demand for 8 apples provided the price
is $8 per apple. Nothing doing, say the customers. At that price, they will not
a) What is the equation for demand? Show
What is the equation for supply? Show your work
If the influential neighborhood moms manage to convince the government to place
a price ceiling on the apple market at $2, what will be the amount of the apples
consumed? Show your work
17.The market for Spam is at equilibrium
at P = $1 and Q = 20 billion tons
a) Show this in a demand and supply
Redraw the diagram toshow consumer and
What is consumer surplus?
What is producer surplus?
Now assume that the government,in an
effort to discourage Spam production, adds a $0.50 tax on Spam production. Show
the amount of deadweight loss created by this tax.
What is deadweight loss and why does it make our market not efficient?
4.Assume the supply and demand curves for cars
P = 15,000 – 2,500 QP = 11,000
P is in dollars and Q is in millions of cars per month.
Draw this market in a graph and show the equilibrium price and quantity.
Calculate the amount of consumer
surplus in this market and explain what that number means.
Calculate the total amount of the
producer surplus in this market.
Now suppose that the government decides to impose a tax of $1000 per car on the
supplier/producer. What is the amount of tax revenue that the government
collects? Show, calculate, and explain.
e)What has happened to total economic surplus
as a result of the tax? Show and explain.